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Letdown for Bank of America

By William Alden April 17, 2013 8:24 amApril 17, 2013 8:24 am

Bank of America said on Wednesday that it earned 20 cents a share in the first quarter, falling short of analysts’ expectations of 23 cents a share. Still, the first-quarter results compared with earnings of 3 cents a share in the period a year earlier. The bank also posted revenue of $23.5 billion. In a statement, Brian T. Moynihan, Bank of America’s chief executive, said, “Our strategy of connecting our customers to all we can do for them is working.” The question now is whether the earnings will add to the recent optimism surrounding the bank, DealBook’s Peter Eavis writes. The bank’s shares were down in premarket trading. Bank of America is holding a conference call at 8:30 a.m. to discuss the results.

SAC SETTLEMENT GETS TENTATIVE APPROVAL | A judge signed off on the $602 million settlement between SAC Capital Advisors and securities regulators to resolve a civil insider trading case, but said he had serious concerns about the language that allowed the hedge fund to “neither admit nor deny” wrongdoing. Judge Victor Marrero of Federal District Court in Manhattan conditioned his decision on a pending ruling from the Federal Appeals Court, DealBook’s Peter Lattman reports.

That language is a common feature of settlements by the Securities and Exchange Commission. But Judge Marrero, in an opinion released on Tuesday, said he would await guidance from a pending appellate case involving Citigroup. In that case, Judge Jed S. Rakoff has rejected a $285 million settlement that allows Citigroup to resolve a fraud case without saying it had done anything wrong. Judge Rakoff suggested the agreement was not in the public interest.

Judge Marrero suggested the “neither admit nor deny” boilerplate was out of place in today’s world. “In this age when the notion labeled ‘too big to fail’ (or jail, as the case may be) has gained currency throughout commercial markets, some cynics read the concept as code words meant as encouragement by an accommodating public — a free pass to evade or ignore the rules, a wink and a nod as cover for grand fraud, a license to deceive unsuspecting customers,” he wrote.

FAIRWAY TAPS PUBLIC MARKETS | Until recently, Fairway was not much more than a popular market on Manhattan’s Upper West Side, where residents went for goods like smoked salmon, medjool dates and cheeses. Today, it is a fast-growing 12-store grocery chain with ambitions of opening 300 outlets across the country. On Wednesday, Fairway hopes the investing public will aid in its expansion after its stock starts trading for the first time. Its initial public offering got off to a strong start on Tuesday evening, with Fairway pricing its shares at $13 each, above the expected range, according to a person briefed on the matter. It raised $177.5 million, valuing the whole company at $536.1 million.

Driving Fairway’s growth is Sterling Investment Partners, a private equity firm that acquired an 80.1 percent stake in the company in 2007 and will continue to control it after the I.P.O. But fresh risks have come with the expansion. The company lost $11.9 million in the fiscal year that ended in April 2012, even as sales increased 14 percent, to $554.9 million.

ON THE AGENDA | Abbott Laboratories and Mattel report earnings before the market opens, while American Express and eBay announce results on Wednesday evening. The Federal Reserve releases its so-called beige book report on the economy at 2 p.m. A Senate Banking subcommittee holds a hearing at 10 a.m. about foreclosure reviews. Bart Chilton, a Democratic commissioner of the Commodity Futures Trading Commission, is on Bloomberg TV at 10:30 a.m.

RESEARCH ON GOVERNMENT DEBT IS CHALLENGED | A 2010 research paper by Carmen M. Reinhart and Kenneth Rogoff of Harvard, which found that countries with debt-to-gross-domestic-product ratios above 90 percent experienced slower growth, is often cited to justify policies of austerity. But a provocative new paper by economists at the University of Massachusetts, Amherst, claims to have found basic flaws in the research. The findings set off a heated debate across the Internet on Tuesday. “The debate comes at a particularly perilous time, as economic officials from the United States and other countries gather for the annual spring meeting of the World Bank and International Monetary Fund in Washington, where many are expected to urge high-debt Europe to ease up on its commitment to austerity in the face of rising unemployment and new economic contractions,” Annie Lowrey writes on the Economix blog.

For Yahoo, Alibaba Stake Is a Selling Point | “Yahoo is still doing better as an investment house than as an Internet company. Its first-quarter earnings beat analysts’ expectations, but much of the gain was from its investments abroad,” The New York Times writes. NEW YORK TIMES

Liberty Global Said to Prepare Offer for Kabel Deutschland | The report came from the European publication Manager Magazin. REUTERS

Dell Reaches a Deal With Icahn | A special committee of Dell’s board has reached an agreement with Carl C. Icahn that limits his ownership stake in the company while allowing him to contact other shareholders about a possible bid for the computer maker. DealBook »

Glencore’s Takeover of Xstrata Gains Chinese Approval | To ease Chinese antitrust concerns, Glencore said it would sell a Peruvian copper mine owned by Xstrata. Glencore also said Mick Davis would step down as chief executive of Xstrata as soon as the takeover was completed. DealBook »

An Unbowed Goldman Reports Profit Growth, but Caution Remains | While its profits rose 5 percent from a year ago, Goldman Sachs faces many market and regulatory challenges. DEALBOOK

Morgan Stanley Said to End Efforts to Prevent Poaching | Morgan Stanley gave up its attempt to stop first-year bankers from talking to recruiters for outside firms, “after employees complained,” according to Bloomberg News, which cites two unidentified people with knowledge of the matter. BLOOMBERG NEWS

Cerberus Founder Said to Consider Bidding for Gun Maker | Stephen A. Feinberg, founder of the private equity firm Cerberus Capital Management, is putting together a group to make a “stalking horse” offer for Freedom Group, the gun maker that his firm is looking to sell, Reuters reports, citing three unidentified people familiar with the situation. REUTERS

Daimler Sells EADS Stake for $2.9 Billion | The German automaker Daimler sold its 7.5 percent stake in the European aerospace giant EADS, the parent company of Airbus, in a share offering totaling about $2.9 billion. DealBook »

Bertelsmann Looks to Raise Up to $2.1 Billion in Sale of RTL Stake | REUTERS

Tech Industry Seen Benefiting From Immigration Bill | The New York Times writes: “The proposed overhaul of immigration law contains much of what the technology industry wished for: An easier green card route for foreigners educated at American universities in math and science; a new visa category for entrepreneurs; and more guest workers to be deployed on short-term projects.” NEW YORK TIMES

Money Funds Are Likely to Face Rule Changes | An S.E.C. spokesman, John Nester, said “the staff expects to have something for the commission’s consideration in the near future.” DealBook »

Lobbyist Said to Be Source of Market-Moving Report | The Wall Street Journal reports: “A key source for a private report that sent health care stocks on a tear earlier this month is a former top congressional aide who is now a health-industry lobbyist, according to e-mails” reviewed by the newspaper. WALL STREET JOURNAL

Europe Votes to Curb Banker Bonuses | European politicians approved major new rules on Tuesday to cap the amount that bankers at the region’s largest institutions can receive in bonuses. DealBook »

Antitrust Chief Backs Limits on Wireless Companies | “The Justice Department’s top antitrust enforcer said on Tuesday that he supported limits on how much of the nation’s airwaves a single wireless company could hold, a condition that could keep AT&T and Verizon from bidding on certain blocks of airwaves during auctions,” The New York Times reports. NEW YORK TIMES

Former MF Global Broker Sentenced to 5 Years in Prison | Evan Brent Dooley received the sentence “for making unlawful unauthorized trades that caused the now-defunct futures firm to lose more than $141 million in 2008,” Bloomberg News writes. BLOOMBERG NEWS